The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Basic Energy Services, Inc (NYSE:BAS), and what that likely means for the prospects of the company and its stock.
Is Basic Energy Services, Inc (NYSE:BAS) a buy right now? The best stock pickers are taking an optimistic view. The number of long hedge fund positions increased by 2 lately. Our calculations also showed that BAS isn't among the 30 most popular stocks among hedge funds.
If you'd ask most traders, hedge funds are seen as slow, outdated investment vehicles of years past. While there are greater than 8000 funds trading at present, We choose to focus on the upper echelon of this group, about 750 funds. Most estimates calculate that this group of people administer most of all hedge funds' total asset base, and by paying attention to their first-class picks, Insider Monkey has unearthed a few investment strategies that have historically outpaced the market. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Let's review the latest hedge fund action surrounding Basic Energy Services, Inc (NYSE:BAS).
What have hedge funds been doing with Basic Energy Services, Inc (NYSE:BAS)?
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in BAS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Basic Energy Services, Inc (NYSE:BAS) was held by Silver Point Capital, which reported holding $12.5 million worth of stock at the end of March. It was followed by Prescott Group Capital Management with a $6.1 million position. Other investors bullish on the company included Contrarian Capital, Renaissance Technologies, and D E Shaw.
As one would reasonably expect, some big names have been driving this bullishness. GeoSphere Capital Management, managed by Arvind Sanger, assembled the largest position in Basic Energy Services, Inc (NYSE:BAS). GeoSphere Capital Management had $0.7 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Mike Vranos's Ellington.
Let's go over hedge fund activity in other stocks similar to Basic Energy Services, Inc (NYSE:BAS). These stocks are Zafgen Inc (NASDAQ:ZFGN), NantHealth, Inc. (NASDAQ:NH), DURECT Corporation (NASDAQ:DRRX), and RADCOM Ltd. (NASDAQ:RDCM). This group of stocks' market valuations match BAS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZFGN,14,34330,-6 NH,3,906,-1 DRRX,4,1974,-2 RDCM,4,13183,0 Average,6.25,12598,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $30 million in BAS's case. Zafgen Inc (NASDAQ:ZFGN) is the most popular stock in this table. On the other hand NantHealth, Inc. (NASDAQ:NH) is the least popular one with only 3 bullish hedge fund positions. Basic Energy Services, Inc (NYSE:BAS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BAS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BAS were disappointed as the stock returned -39.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.